Providing for Autonomous Electronic Devices in the Electronic Commerce Act 1999

VI. Summary of Recommendations

One of the central themes that has been expressed throughout this report is that the devices that automate electronic commerce will soon be able to animate it. These devices will cease being mere conduits of communication. They will soon begin to look and feel more like intermediaries than like instruments. And as they do, it will become more and more difficult to determine how the law should treat them.

The temptation amongst academics, lawyers and legislators alike is to treat this problem as turning upon a dichotomy. Accordingly, electronic devices are either legal beings or they are nothing. Either they possess rights and owe duties or else they have no independent legal power whatsoever. The reason for the dichotomy is that if it were anything but either of these two extremes, allowing those devices to function in electronic commerce would interfere with our doctrinal understanding of the law of contract. Such an interference, it is thought, is not to be tolerated since the success of electronic commerce will depend on its ability to comport with established ways of doing business.

In this report it has been suggested that the above reasoning adopted by most academics, lawyers and legislators exemplifies a false dichotomy. If it is true that the legal ontology of an electronic device falls somewhere in between that of a piece of office equipment and a living business person, this causes no new problem for the law. Our law can and does accommodate for intermediaries in a transaction, even where those intermediaries are said to lack the juristic capacity to contract for themselves. Consequently, an absolute attribution rule that considers the operations of an electronic device to be the acts of the person using it is not the only option that follows from a recommendation against deeming such devices to be independent persons.

Situating these rather conceptual points within the context of the proposed electronic commerce regimes, the question becomes one of limitation. If it is incorrect or unjust to always attribute the operations of an intermediary to the person who employs it, what mechanism is better suited for carving out the appropriate bounds of contractual liability? The proposed statutory buzz words are “the manifestation of assent.” Indeed, this sounds like good, solid contract doctrine. The problem is that, in the context of agent mediated electronic commerce, this phrase turns out to be a misnomer. Although the phrase is meant to signify the requirement of an assent by the person who is a party to the agreement, in the case of electronic commerce, it is the electronic device operating on his or her behalf that usually does the manifesting. In fact, it is contemplated that persons using electronic agents will often be unaware that any such transaction has taken place.

As is the case with human intermediaries, when an electronic agent makes manifest something other than what the person using it would have manifested had she or he reviewed the proposed transaction, it is unclear whether it can truly be said that there has been a “manifestation of assent.” If it were a person and not a device playing the role of intermediary, the law of agency would require that we look either to the intentions of the principal or else to the representations made by the principal to the third party to see whether there was indeed a manifestation of assent. But, according to the majority of proposed electronic commerce regimes, we need not bother with any such investigation in the case of agent mediated electronic commerce. The proposed attribution rules generally provide that anything made manifest by an electronic agent will be attributed to the person using it. It is suggested that such a rule is too removed from traditional common law principles and would not promote or foster the development of electronic commerce.

Consequently, one of the chief recommendations made in this report is that the drafters of the UECA should carefully consider the way that our law treats other intermediaries. It is suggested that this area of the law is a promising place in which to find the appropriate set of limiting principles to accompany an attribution rule of the sort found in the proposed and enacted legislation. Although the devices of intelligent agent technology might not yet appear to be sufficiently “intelligent” to require an application of the law of intermediaries, the promise of agent technology will likely make an application of the law of intermediaries necessary in the near future. The recommendation put forth in this report is that an application of the external aspects of agency law would furnish a useful set of limiting principles which could operate in conjunction with fundamental principles of contract law to help determine whether there has in fact been a “manifestation of assent” in particular instances.

The following is a reiteration of each of the eleven recommendations offered in Parts III, IV and V of this report.

PART III.

1. It is recommended that the doctrinal difficulties associated with electronic devices not be cured by treating them as independent legal persons. Although a legal mechanism exists for extending personality to artificial entities, there is not as of yet any compelling reason to build the complex and costly registry that would be required in order to do so. It makes more sense to attempt a solution to the problem through a slight modification of existing common law principles.

PART IV.

2. Currently, both the Model Law and the UETA attribute the transaction of an electronic agent to the person using it even if the electronic agent malfunctioned or performed operations completely unintended by the person using it. This is highly problematic. Although there are a number of situations in the law of contract where the emphasis on a party’s actual intentions are displaced in favour of the objective theory of contract or the reliance theory, an attribution rule which has the ultimate effect of imposing strict or even absolute liability is inappropriate. It is therefore recommended that the attribution rules contemplated in the UECA contain a mechanism that will not impose strict or absolute liability on the person using the device.

3. At present, the error provision found in section 109 (b) UETA focuses solely on the mistakes potentially made by individuals when entering into an automated transaction. However, it is also possible that an electronic agent might malfunction or, alternatively, function properly though unpredictably to enter into transactions that were completely unintended, unforseen and unauthorized by the person on whose behalf the electronic agent was operating. The failure to include electronically generated mistakes and other unpredicted and unintended transactions in the Act could deter merchants from engaging in electronic commerce if electronic agents are given an unlimited power to bind them without any regard to the circumstances of the transaction. It is therefore recommended that the error provision in the UECA contemplate electronically generated errors as well as other unpredicted and unintended transactions.

4. The most recent version of UCITA, section 202 contains language that is somewhat different from the language found in the parallel provisions in the Model Law and UETA. Section 202 implies that a contract will be formed through the operations of electronic agents only if the transaction demonstrates the existence of an agreement between the parties using the electronic agents. Presumably, as is the case in traditional contract law, this will be determined through an objective test based on the reasonable intentions of the parties. This requirement furthers the aim of creating a media neutral environment while, at the same time, harmonizing electronic commerce with the traditional approach to contract formation. It also allows the notion of consent to neutralize the strict liability effects of the attribution rules. It is therefore recommended that the contract formation provision contemplated in the UECA contain language similar to that of UCITA, section 202.

5. Though its language is flawed, the most recent version of UCITA, section 112 attempts to make it clear that the manifestation of assent through the instrumentality of an electronic agent will require circumstances that constitute a person’s acceptance of an offer. In order to justly accommodate situations in which an electronic agent’s manifestation of some person’s assent is unreliable and to thereby allow for contractual liability to be limited to only those instances in which a person intended to manifest assent through the electronic agent, it is recommended that any provision in the UECA pertaining to the manifestation of assent should use language which expressly indicates that the manifestation of assent is made through an electronic agent, never by an electronic agent.

6. The defect in the error provision found in section 109 (b) UETA is contemplated in the most recent version of UCITA, section 206. This section does contain a mechanism for limiting contractual liability in the case of electronic mistakes and is the only proposed legislation that addresses the issue. It is recommended that the UECA adopt a provision similar to UCITA, section 206. Such a provision should attempt to improve upon UCITA, section 206 by defining the notion of an “electronic mistake”. It is further recommended that the notion of an electronic mistake be defined with sufficient breadth to include computer (and computer program) generated errors, as well as circumstances in which the electronic agent operated in an unpredicted manner that resulted in a transaction completely unintended by person using it.

7. The most recent version of UCITA, subsection 215 (d) contemplates a tort law remedy for losses incurred by someone who relies to his or her detriment on electronic events initiated by another. This is a useful provision in that it provides a legitimate remedy that might be otherwise unavailable via the law of contract. It is recommended that the UECA adopt a provision similar to subsection 215 (d)

PART V.

8. It is recommended that the principles that comprise the external aspect of agency law be used in conjunction with an attribution rule in order to preclude the possibility that an electronic agent will have an unlimited power to bind its ‘principal’. The principles that comprise the external aspect of agency would harmonize with fundamental principles of contract law and would assist in determining whether there has in fact been a “manifestation of assent” in particular instances.

9. It is recommended that agency law’s “authority” concept be utilized to place limits on the contractual liability of those who initiate electronic devices for the purposes of electronic commerce. The implementation of such a recommendation would safeguard the contractual intentions of ‘principal’ and ‘third party’ by ensuring the existence of a true consensus ad idem. Applying the electronic agent metaphor and utilizing the authority concept will not disrupt or alter the fundamental principles of agency which, for hundreds of years, have allowed entities lacking juristic capacity to act as agents even when those entities would not have been capable of acting for themselves. Because an agent’s capacity and intentions are considered irrelevant to the external agency relationship, i.e. the relationship between principal and third party, treating electronic devices as ‘agents’ is far less controversial than treating them as independent persons.

10. It is recommended that agency law’s doctrine of ratification be adopted in electronic commerce. The implementation of such a recommendation would further safeguard the intentions of ‘principal’ and ‘third party’. It would also operate to cure minor defects in an electronic ‘agent’’s ‘authority’, it would could minimize technical defences and it would prevent unnecessary lawsuits. As between ‘principal’ and ‘third party’, the ‘third party’ will get exactly what he bargained for while the ‘principal’ is simply held to the transaction that she chose to adopt.

11. It is recommended that the rule in agency law which precludes undisclosed principals from ratifying unauthorized transactions be adopted in electronic commerce. Such a rule will encourage those who transact through the intermediary of an electronic device to present those transactions as openly and honestly as possible. The implementation of such a rule would also have the salutary effect of reducing the number of mistaken transactions. Further, it would minimize technical defences and perhaps prevent unnecessary lawsuits.

Next Annual Meeting

2018 Conference (Centennial)

Delta Hotel

Québec City, QC

August 12 - 16, 2018